NZ News

Tower Corporation's long march towards demutualisation is almost over, following an overwhelming member vote in favour of the concept and the withdrawal of a fi-nal appeal to the Privy Council disputing Tower's plans.

Almost all of Tower's members who voted approved the company's demutualisation plans at an extraordinary general meeting held earlier this month with 99.5 per cent of parent company members and 98.7 per cent of subsidiary company members giving their consent.

Tower only needed 75

Tower Corporation's long march towards demutualisation is almost over, following an overwhelming member vote in favour of the concept and the withdrawal of a fi-nal appeal to the Privy Council disputing Tower's plans.

Almost all of Tower's members who voted approved the company's demutualisation plans at an extraordinary general meeting held earlier this month with 99.5 per cent of parent company members and 98.7 per cent of subsidiary company members giving their consent.

Tower only needed 75 per cent support from both classes of members to proceed with plans to list on the Australian and New Zealand stock markets.

Managing director of Tower, James Boonzaier, says the vote in favour of demutu-alisation was even more resounding than the 98.3 per cent member support AMP re-ceived when it demutualised in 1998.

"We are delighted with this stunning outcome. Tower members can now look forward to Tower moving into the new millennium as a listed company with the financial resources to take advantage of new opportunities in rapidly changing markets," Boonzaier says.

Following the vote, Tyndall withdrew an appeal to the Privy Council (initiated by Tyndall's former owner, Guinness Peat Group (GPG)) contesting the validity of Tower's demutualisation proposals.

Boonzaier says Tyndall's decision clears the way for Tower to list by late Sep-tember or early October this year.

A prospectus is expected to be produced in July with 53 million fully paid shares to be issued to parent company members and 43 million half-paid shares issued to subsidiary members.

Tower shares are expected to list at between NZ$6-NZ$8.

The company will also offer $350 million dollars worth of Tower shares to insti-tutions, clients and employees and raise a further $300 million in debt to fi-nancially restructure its subsidiary companies.

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The size of New Zealand's newly opened workplace compensation market has been revised down by a third on early predictions, according to head of Fusion Insur-ance Services, Nigel Edmiston.

Privatisation of the workplace compensation market, which previously was the ex-clusive domain of the government Accident Compensation Corporation (ACC), is due to take force on July 1.

Several companies have been quoting for the business in the preceding months in a market which was originally estimated to have been worth $900 million.

Edmiston says the market is now expected to be worth around $600 million in an-nual premiums.

He says many employers have improved their workplace conditions and consequently reduced their ACC premium.

"The market is smaller than originally thought but we are very busy with quotes. We've quoted around 40 per cent of the market already. There's still a long way to go as quoting will close off on June 25," Edmiston says.

He says business is coming through financial advisers, life agents and direct calls from employers.

Fusion, an amalgamation of Royal and SunAlliance, Southern Cross Healthcare and GMV Associates, is one of several players vying for market share.

Others include NZI, HIH, MMI, Cigna and the new state owned enterprise @Work In-surance.

Edmiston says the present number of players is enough to make the market com-petitive but expects others to join in at some stage.

He says while workplace compensation will be a new experience for many New Zea-land insurers, especially the claims and case management aspects, many have brought in overseas experts.

"Fusion looked closely at how the United States and Australia manage their work-place compensation business and most insurers will be modelling on overseas ex-perience," Edmiston says.

However, a cloud hangs over the whole business as the Labour Party have indi-cated they will repeal the privatisation of workplace compensation if they are elected. An election is due later this year and many are predicting a La-bour/Alliance centre-left government.

Edmiston says that while some are vehemently opposed to the privatisation proc-ess, he believes their rationale is flawed.

"Around 90 per cent of employers will get cheaper and better deals under priva-tisation. We have a contingency plan in place but the best thing we can do is do a good a job as possible so there will be no demand from employers for a return to the old scheme."

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Other New Zealand fund managers are set to follow Colonial First State's (CFS) move and rationalise their retail products according to CFS chief Bruce Abraham.

CFS has slimmed down its funds from 27 to 12, following months of product as-sessment in the wake of Colonial's takeover of Prudential.

Abraham says CFS is the first New Zealand fund manager to rationalise their re-tail product range.

"It is not a simple process, there are some risks, particularly in the communi-cations area, which have to be carefully handled. I'm sure other fund managers are watching very closely to see how we are doing it," says Abraham.

He says the move has been very well received by the market and the three month hold on the products before they wind up gives planners, brokers and financial advisers plenty of time to explain the changes to their clients.

Abraham expects the majority of clients in the funds to be wound up will trans-fer to other CFS products, as was the case when Colonial Australia followed a similar rationalisation process.

All of the Prudential funds CFS inherited following the takeover last year will be wound up as well as five of Colonial's own unit trusts and superannuation plans. The abolished funds will be closed for all business, including redemp-tions, until the wind-up date of August 11. All redemptions will then be proc-essed using the unit price current at that time.

Abraham says the reduced suite of products are more in tune with the CFS company style and will be much easier to market.

He says while all of Prudential funds will go, a new fund, the Tasman Developing Companies Fund, has been created out of Prudential's Emerging Companies Trust.

"The emerging companies fund complemented our range but invested only in New Zealand. The new Tasman fund will invest in Australia too," says Abraham.

He says New Zealand fund managers have been "surprisingly slow" to take advan-tage of the liquidity and diversification benefits of participating in a single Australasian market.

Abraham also says there is a need for a wider variety of retail investment prod-ucts in New Zealand.

"Eleven of our 12 products are unique in New Zealand. It is a weakness in this market that fund managers just copy each other and produce vanilla products, which are different only in name."

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